Posts Tagged ‘durable power of attorney’

Durable Powers of Attorney: “Springing” or “Surviving”?

NOVEMBER 7, 2016 VOLUME 23 NUMBER 42
For over four decades, Arizona law has permitted residents to create powers of attorney that continue to be valid even after the signer becomes incapacitated. That simple concept, once thought to be radical, has become widespread: all U.S. states now permit powers of attorney to be “durable.”

To make a power of attorney “durable” under Arizona law, it should include language that indicates the signer intends it to either:

  • Continue in effect even if the signer becomes incapacitated, OR
  • Become effective only if/when the signer becomes incapacitated.

You can read the law in question, Arizona Revised Statutes sections 14-5501 and those following, to see how durable powers of attorney work in Arizona. There is even a basic form for what the signature block might look like.

But what is the difference between the two kinds of durable powers of attorney? Lawyers often refer to them as “surviving” or “springing” powers — the former exist and are operative as soon as signed (they “survive” the later incapacity), while the latter become effective (they “spring” into existence) upon the later incapacity of the signer.

Which is better? Of course that depends on what the signer prefers, but there are some practical considerations that you might not have thought about.

Many of our clients feel uncomfortable about giving their agent(s) the power to handle financial matters immediately. While they completely trust the person they name as agent, those clients think it might be tempting fate to give authority to someone else. They don’t really expect their agent to act unless and until they are unable to take care of things themselves, and prefer to make their powers of attorney the “springing” type.

There are problems with this approach, however. Those problems can include:

  1. How to prove incapacity? How, exactly, will your agent prove that you have become incapacitated? Will it require a letter from your attending physician? Or two letters from two different physicians? Or your consent? How protective do you think you should be? Of course, one of the reasons you are signing a power of attorney is so that we won’t have to initiate legal proceedings to permit your agent to take over your finances. By making the proof of incapacity difficult, you might be reducing the value of the very document itself.
  2. Is there a doctor in the house? Perhaps you have considered the problem described above, and you’re willing to let any doctor (not necessarily your attending physician) certify your incapacity — and you are not planning on requiring a second opinion. Still, it can be quite a challenge to get any medical person to sign a letter saying you’re incapacitated. It might be that your medical care isn’t even being provided by a physician — maybe you’ll be evaluated by a nurse practitioner, or a psychologist. Can we write the document so that your chiropractor could make the decision? And have you tried to get a letter signed by any medical provider in the modern era of HIPAA?
  3. “I’ll be the first to know when I need it.” No, tragically, you won’t. In fact, you’ll probably benefit from assistance for a period of time when you are still capable of doing things yourself. The law has a quaint notion — people are fully competent until some future instant when they suddenly, and demonstrably, become incapacitated. That isn’t actually how it happens. You are much more likely to slowly decline, needing help with some large decisions (perhaps investment management, or organizing assets) long before you absolutely need help with smaller decisions (like signing checks). Consider the importance of letting your agent take over gradually, leaving you in control of as much as you can (and wish to) manage for as long as possible.
  4. Planning on leaving Arizona (even for visits)? Some states (notably Florida) don’t even permit “springing” powers of attorney. Maybe you think it unlikely that you will relocate to Florida, but we are a pretty mobile society. You might well end up in a state where the “springing” power of attorney is problematic — and possibly at a time when you are unable to sign new documents.
  5. Really? You don’t trust your agent? Giving someone a power of attorney is, literally, giving them the tools to misuse your assets. Of course they are not supposed to commingle assets, take your funds or make decisions in their own interest. Some do. You need to make your selection very, very carefully — your agent needs to be completely trustworthy. And if you trust them when you’re incapacitated (when you don’t have the mental acuity to protect yourself), why wouldn’t you trust them right now, when you are able to monitor their actions closely?

As you can probably tell, we are inclined to recommend that people sign “surviving” durable powers of attorney, rather than “springing” powers. That said, clients frequently are just uncomfortable giving immediate authority, and we will respect your decision. Don’t be surprised if we try to convince you to reconsider, though.

Incidentally, the same considerations apply when we consider health care powers of attorney — but there is a different practical reality. Since you will necessarily be present when health care procedures are undertaken, and since medical personnel are almost certainly involved, it is much easier to assess whether you are able to make your own decisions. A good agent will involve you in the decision-making process to the extent that you are able to participate. A good medical provider will do the same.

Lawyers Continue Battle After Guardianship Dismissal

MAY 23, 2016 VOLUME 23 NUMBER 20
It will come as no surprise to anyone who has been involved in guardianship and conservatorship proceedings: the legal fees and related costs can often spiral out of control. Though most guardianship proceedings do not cost tens of thousands of dollars, some do. In fact, the battle can sometimes be about the attorneys’ fees, rather than the need for a guardianship.

A recent case in North Carolina illustrated this problem. It involved a woman we’re going to refer to as Connie, who was estranged from her brother Fred, her closest relative.

Connie knew that she was slipping, and that she was losing her ability to handle her own finances and personal decisions. She consulted a long-time friend, Harriet Hopkins. Ms. Hopkins was a lawyer practicing in the community, and she prepared the documents Connie needed — including a durable financial power of attorney. Because she had no one else to name, Connie chose to make Ms. Hopkins the agent under her power of attorney.

Some time later brother Fred learned that his sister was failing, that her attorney was managing her affairs and (most concerning to Fred) that the power of attorney included a provision that would have allowed Ms. Hopkins to make gifts to herself from Connie’s assets and income. Fred decided that he needed to file a court proceeding to get himself — or someone independent — appointed to take care of Connie’s finances and medical decisions. He hired lawyer James West to pursue the guardianship for him.

As in some other states, in North Carolina initiation of a guardianship automatically results in appointment of a lawyer as “guardian ad litem” for the subject of the proceedings. A local lawyer, Lynn Andrews, was appointed; she immediately reported that she was close friends with Ms. Hopkins and should not be appointed. The local court appointed another attorney as Connie’s guardian ad litem, and Fred’s lawyer began to discuss the case with her.

Very shortly after the case began, however, attorney Andrews let the other two lawyers know that Connie had hired Ms. Andrews as her personal lawyer. She vigorously objected to the proceedings on Connie’s behalf, and filed a motion to dismiss the guardianship altogether. Her argument: there was no doubt that Connie’s capacity was in decline, but no guardian was necessary because Connie had taken appropriate steps to assure her care was supervised and her finances taken care of.

In the course of the controversy, and in order to make sure there were no concerns, Connie signed a new power of attorney. The new document still named Ms. Hopkins as her agent, but removed the authority to make gifts. Everyone agreed that no gifts had actually been made while Ms. Hopkins held that power.

Fred’s petition for guardianship was dismissed within about a month of its initial filing. There were some further skirmishes about the precise terms of the dismissal, but Connie was no longer at any risk of having the court appoint a guardian — Fred or anyone else. And that might have been the end of things.

After the dismissal was finalized, Ms. Andrews filed a new petition with the guardianship court. She alleged that Fred and Mr. West, his lawyer, had behaved improperly by filing a guardianship petition without any basis. She sought an order requiring, as a penalty, payment of Connie’s legal fees by both Fred and his lawyer.

Mr. West responded by filing a petition against Ms. Andrews, asking that she be sanctioned, and ordered to pay his attorney’s fees and costs. His argument: by filing the request for personal sanctions against him (and his client) for allegedly abusive legal proceedings, Ms. Andrews had herself abused the legal system.

After a three-day hearing (which, it is worth repeating, was not about Connie’s capacity or her possible need for a guardian), the trial judge decided that sanctions against Ms. Andrews were appropriate. He first ordered that she would be personally responsible for Fred’s legal fees; later, the judge found that the total fees and costs of $122,987.72 should be assessed against her.

The North Carolina Court of Appeals considered the judge’s order, and decided (by a 2-1 vote, incidentally) that the case did not warrant any punishment against Ms. Andrews. The attorney’s fee award was reversed, and each side ended up paying their own legal fees (though Fred was ordered to pay the cost of a multidisciplinary evaluation of Connie that had been conducted for the proceedings below). Matter of Cranor, May 17, 2016.

What does Connie’s case tell us about guardianship and conservatorship in Arizona? While the proceedings can be different from state to state, some rules do apply across most states. One of those is that the parties — and their lawyers — have a duty not to let the proceedings run up giant legal bills.

A leading Arizona case addresses somewhat similar facts, but with a slightly different result. In the Arizona case, our Court of Appeals ultimately ruled that the lawyer for a guardian and conservator has a duty to constantly recalibrate one question: is the legal representation justifiable considering the cost and possible benefit to the ward?

Which is Better: Guardianship or Power of Attorney?

SEPTEMBER 8, 2014 VOLUME 21 NUMBER 32

Here’s a question we get asked a lot: “which is better for me to get for my mother — a guardianship or a power of attorney?” Sometimes the questioner is checking on the difference between a conservatorship and a power of attorney or (less commonly) a guardianship and a conservatorship. But the question almost always has the word “better” embedded somewhere.

The question itself is misleading, and our answer almost never satisfies. The problem is simple: if your aging parent needs someone to make decisions (medical, placement, financial or other decisions) for him or her, you almost never have a choice about whether to pursue getting a signed document (like a power of attorney) or a court order (like a guardianship or conservatorship). Why not? Because if your parent is able to sign a power of attorney, he or she is probably not a candidate for a guardianship or conservatorship. Conversely, if you could get a guardianship or conservatorship order, your parent probably can’t sign a power of attorney.

A word about language, and the peculiarities of Arizona law: in Arizona (and in some but by no means all other states) a “guardianship” is a court proceeding in which one person is given decision-making authority over another person’s medical care, placement and personal decisions. A “conservatorship” is a similar court proceeding, but with the end result that one person is given authority over another person’s finances. And Arizona does not have a procedure (as some other states do) for a “voluntary” conservatorship, which would allow the court to appoint a conservator even though the person in question is fully competent but willing to allow appointment of a conservator.

In order to have the court appoint a guardian or a conservator in Arizona, you would need to show that your parent (or other family member, or friend for whom you are ready and appropriate to act) is unable to make and communicate responsible decisions. That, actually, is the magic language for a guardianship; conservatorship requires you to be able to show that your parent, family member or friend is unable to provide proper management of his or her assets.

A power of attorney, on the other hand, does not involve courts at all. Signing a power of attorney is a voluntary act undertaken by a competent individual who understands the purpose and effect of his or her signature. As you can see, that is likely not possible for most people for whom a guardian and/or conservator could be appointed.

So the question is usually not which approach would be “better” — it is which approach is possible. If the individual is not able to sign a power of attorney, we usually add our own question to the mix: is getting a guardian and/or conservator appointed the best way to handle the problems that have arisen — is it even necessary to pursue guardianship or conservatorship?

Now pose the question differently. You are a fully competent adult, thinking about your future. You are worried about having someone available and able to take over your personal (health care) and financial decisions if you should be come unable to do so yourself. Is it better for you to sign a power of attorney, or should you simply rely on the legal system to establish a guardianship and/or conservatorship when the time comes for you?

The answer to THAT question is easy, at least in the vast majority of cases. The cost, difficulty, and invasion of your personal dignity involved in a guardianship/conservatorship almost always makes it better for you to sign a power of attorney now, while you can make your own choice. Who should NOT sign a power of attorney? Really only people who have no one trustworthy enough to take responsibility (and there are people in that unfortunate situation — to many people, in our experience) should make a conscious decision to NOT sign a power of attorney.

Notice that we have not distinguished here between (a) health care powers of attorney and (b) financial (or “general”) powers of attorney. That’s because the same values and decisions apply to both. But, in Arizona, at least, there is one important difference between the two levels of urgency: your next of kin (and some others, if you do not have close family members) might have the authority to make health care and even placement decisions for you even though you have not signed a power of attorney (and no court proceedings have been initiated). Family members — even spouses — do NOT have any authority to handle your finances without a power of attorney, however.

Which is better? If you are in a position to plan for yourself, it is almost always a good idea to choose an agent (you can choose different financial and health care agents, if you’d like) and sign powers of attorney. Do it now — don’t wait until you actually “need” the documents, because that will almost certainly be too late. Don’t rely on your belief that everyone knows what you want — that carries no weight in the legal system, unless it has been reduced to writing.

If you’re facing the problem from a child’s perspective, we’re sorry to say that it’s almost never relevant to tell you which approach is “better.” Usually it is a question of which is available. We can help, but it is likely to be more expensive and difficult if your parent (or spouse, or even child) didn’t get around to signing a power of attorney.

Making Your Power of Attorney More Useable — and Useful

MAY 26, 2014 VOLUME 21 NUMBER 19

If you have had your estate plan prepared or reviewed by one of the lawyers at Fleming & Curti, PLC, you almost certainly have signed a durable power of attorney. You may have signed a document prepared by another lawyer, or even found one online or in a document kit. Regardless of where you got your power of attorney, it is probably the single most important document in your estate plan. It is the Rodney Dangerfield of legal documents — it seldom gets the respect or attention it deserves.

Why is the power of attorney so important? Because there is a high likelihood that you will experience a period of diminished capacity before your death, and a high likelihood that no probate proceedings will be required when you do die. Your will is an important document, but it has no usefulness while you are still alive. Your health care power of attorney is an important document, but it is less likely to be pivotal in handling your personal affairs at the end of your life. Your trust is important, but even if you transfer all of your assets to the trust’s name there is the possibility that assets will slip out of the trust over the years — making your power of attorney essential to get assets retitled after your capacity diminishes but before your death.

No doubt about it — your financial power of attorney is a central component of your estate plan. It is also probably the single most dangerous document you will ever sign. Think about the power you are giving to the agent you name in your power of attorney: it is a literal license to steal. Of course you can trust your family and close friends — but you should know that when exploitation of vulnerable seniors does occur, it is almost always involves misappropriations using a power of attorney.

So if this document is critically important, and terribly dangerous, what should you consider before signing it? There are number of pieces of advice we can give you about your financial power of attorney:

  1. Sign one. Yes, it is dangerous — but it is important to have one in place. Arizona lawyers will tell you that the Arizona probate process is not as complicated, expensive or time-consuming as people think it is — but the similar process for getting control of living people’s financial affairs (called “conservatorship”) is everything people think they should hate about probate. No power of attorney in place when you become incapacitated? Your spouse can not handle your finances automatically. Your will provides no assistance. Your finances are likely headed to probate court.
  2. Consider opting for a “surviving” power of attorney rather than a “springing” power. Many of our clients are uncomfortable signing a power that could be used while they are still competent to manage their own affairs. They say (and reasonably so) that they want to handle everything themselves so long as they are able to — and there’s no reason to expose their assets to problems unless they become incapable. Fair enough, but if you do not trust your named agent to behave properly while you are still able to watch, why would you ever put them in charge of your affairs precisely when you are most vulnerable? Do you realize that by making the power effective only upon your incapacity, you are forcing us to get some kind of certification that you have become incapacitated? And what about the time when you are just making slightly foolish decisions, or have just become somewhat inattentive — do you really mean to prevent your agent from acting during those times? Nationwide, the trend is toward powers of attorney that “survive” your incapacity, rather than “springing” into existence when you become incapacitated.
  3. Sign your bank’s power of attorney form, too. The powers of attorney we prepare are works of art. They cover countless items that you would never think of, and even your bank’s lawyers would never think of. They are beautifully crafted, and they are worth every penny you pay for them. But your bank is stuck on this odd notion that their two-paragraph form is better, and they will keep trying to get you to sign it. We say: give up. Just sign their form AND the beautifully-crafted power of attorney we prepare. It will make your agent’s job easier. The same thing goes for your brokerage house, too — let’s get their form and get it signed. Let us help you get the right form, too, since the bank teller or brokerage house clerk you talk to will often hand you the wrong form, and you’ll end up creating a joint tenancy account with your agent rather than giving them a power of attorney.
  4. Learn the language. Impress your neighbors, friends, and bankers. The person named in your power of attorney to handle your affairs is called your “agent” (or, if you want to be more old-fashioned, your “attorney-in-fact”). They are not your power of attorney — that term is just for the document itself. So when your agent signs documents for you, they can sign as something like: “John Doe, as agent for Janet Rose” or “Janet Rose, by her agent John Doe.” This, of course, assumes that your name is Janet Rose, and your agent’s name is John Doe. You might need to make appropriate changes.
  5. Make sure your agent knows where to find the document. You don’t have to give any of your estate planning documents to your family while you’re still alive. Some people prefer privacy. Some do like to hand out copies, and that is also fine. But whether you actually give a copy of the power of attorney to your agent or not, we do urge you to let him or her know that it will be his or her job to get the document and take charge if something should happen to you. That means you have to keep the document somewhere it can be located, and update your information as you update the document.
  6. Update your power of attorney. Speaking of keeping things current, we do think it is a good idea to sign a new power of attorney every five years or so — even if you are not making any changes. Our beautiful form (see above) changes gradually over time as we add new items (our latest additions to the language of most powers of attorney: provisions for pets, and for your online accounts). The law changes gradually, and old documents are usually grandfathered in when there are changes. But it just makes sense to try to have a document that was signed in the same decade (or so) as it is being used.

We hope those tips help. Let us know if they trigger anything that makes you think you need to update your documents.

 

More Definitions for Estate Planning Terms

FEBRUARY 10, 2014 VOLUME 21 NUMBER 6

Last week we gave you short definitions of some common estate planning terms, like “will” (and “pourover will”), “trust” (including both “living” and “testamentary” trust), “grantor trust” and more. This week we want to continue that project with another batch of common terms:

Durable power of attorney — sometimes called a “financial” or “general” power of attorney. The key is that the power of attorney continues (or becomes effective) even if you become incapacitated. This is simultaneously the most important and most dangerous document that most people will sign with their estate planning. Why dangerous? Because it gives such broad, mostly unchecked power to someone else to handle your finances.

Living will — a document by which you give directions about how you would like to be cared for (or what care you would prefer not to have) at the end of life. That’s not the only time the living will is effective (or important), of course, but that’s what people usually think of. This is the document you might sign to direct that you not receive artificially-supplied food and fluids at a time when you are no longer able to make decisions yourself. OR you might direct that you DO want food and fluids (and/or other care) provided in such a situation.

Health care power of attorney — you can designate someone else to make medical decisions for you if you become unable to make or communicate decisions yourself. That person is called your “agent” or “attorney-in-fact,” and the document that names them is your health care power of attorney. That’s the term usually used in Arizona, by the way — other states might use different terms for the same concept.

Advance directive — any document by which you provide for medical decision-making in the event that you become incapable is called an advance directive. The most common advance directives are health care powers of attorney and living wills, but there are others. In Arizona, for instance, you might have an advance directive about mental health care decisions, or rejecting resuscitation measures, or even giving someone authority to decide when you should stop driving. These are a little bit more specialized, and you should talk with your attorney about them.

UTMA accounts — UTMA stands for “Uniform Transfers to Minors Act”, and it refers to a law that has been adopted in some form in every American state. It amounts to a simple sort of mini-trust set out in the law — rather than pay to have a trust set up for a minor, you can simply make a gift to a UTMA account. That makes it easy and inexpensive. It also means that you are stuck with the terms of that legislative trust, but it’s one way to make gifts to children and grandchildren.

529 plans — as long as we’re writing about children and grandchildren, we should mention these popular methods of making gifts. “529” refers to the section of the Internal Revenue Code which both permits and governs these accounts. Once again, it is a simple and inexpensive way to make a gift to your child or grandchild, provided that the primary purpose of your gift is to pay for future educational costs. Ask your attorney (and also your accountant and financial planner) for more information and direction if this idea seems appealing.

“Crummey” trusts — sometimes called “irrevocable life insurance trusts” (or abbreviated as ILITs), these trusts are a method of transferring assets (often, but not always, life insurance) to future generations without making the gift outright and absolute. The nutshell version: you make a gift of less than the annual exclusion amount (see below) to a trustee, and the trustee notifies the beneficiary that they can take out the gift. When they don’t remove the gift, for tax purposes the transfer is treated as having been made by the beneficiary, so the gift is deemed to have been completed. These trusts are often used to allow gifts of the annual premium amount for life insurance, or to make gifts without giving the beneficiary a chance to misspend the gift.

Annual gift tax exclusion amount — there is a tremendous amount of misunderstanding about this concept. In 2014 you can make a gift of up to $14,000 to any person without having to explain yourself to the Internal Revenue Service or anyone in the federal government. Your spouse can do the same thing — even if it is your money that funds the gift. You (and your spouse, if he or she participates) can do the same thing for as many individuals as you’d like. Here’s the misunderstanding part, though: if you give, say, $20,000 to one person, that doesn’t mean you pay an gift tax, or you have to get government approval. It just means you have to file a gift tax return — and if the amount you total up from all of those returns over your lifetime gets to $5,000,000 (it’s actually more than that, but we’re trying to make this simple) then you might have to pay a gift tax. This $14,000 figure, by the way, has absolutely nothing to do with Medicaid eligibility (yes, you can make a $14,000 gift — but it might make you ineligible for Medicaid even though it’s blessed by the IRS).

And, finally, this perennially popular concept/term:

EINs — “Employer Identification Numbers” are issued by the Internal Revenue Service for probate estates, trusts, and other entities that might have to file income tax returns. When someone asks for your “TIN” they mean that they want either your individual Social Security Number or the appropriate EIN. Even if the trust or estate does not have employees (and even if it never will) it still gets an Employer Identification Number (EIN). Does your trust need to have an EIN issued? That is an enduringly popular question, which we have addressed several times before (and undoubtedly will again).

The Difference Between Powers of Attorney and Guardianship

JULY 18, 2011 VOLUME 18 NUMBER 26
“Elder law” (what we practice here at Fleming & Curti, PLC) can be a fairly broad practice area. We work in estate planning, long-term care planning, guardianship and conservatorship, trust administration and probate — and each of those areas encompasses a number of other topics as well. But some variation of the question below is one of the most common questions potential new clients ask us. We want to take a moment to explain the difference between two poorly-understood legal concepts: powers of attorney and guardianship/conservatorship.

Here’s the question, distilled to its essence: We had to put dad into a nursing home. The staff there are telling us we need to get a power of attorney. Can you prepare a power of attorney for us?

Seems like a simple enough question. A power of attorney is, after all, a fairly straightforward document. You can download a form from the internet, and many seniors have already signed one. Turns out that the question is usually much harder to answer than it appears, however.

Different kinds of powers of attorney

The first issue: there are different kinds of documents that are all called “powers of attorney.” As if that wasn’t confusing enough, some states (and some practitioners) use different terms — “health care proxy,” or “patient advocate designation,” or “durable power of attorney,” for example — for what are essentially the same things.

In general terms, there are two well-recognized kinds of power-of-attorney document. One kind designates some one else who can make decisions about the signer’s health care — medical authorization, placement decisions and the like. The other names some one to handle financial matters — check signing, sale of property, transfers of assets into a living trust, even gift-giving (in some cases).

When the nursing home tells you that you need a power of attorney for your recently-admitted father, they are probably most concerned about the health care power of attorney. They want someone to be able to approve medications and treatments, to make decisions about hospitalization (or declining hospitalization) and to notify about your father’s condition and progress. They may also be interested in making sure you have power to handle his finances, especially to pay his nursing home bills — but that may not be their primary focus.

Distinguish guardianship and conservatorship

Contrast the power of attorney with the guardianship/conservatorship process. If you have to secure a guardianship or conservatorship with regard to your father, that means you will have to file a court proceeding and go through a number of mandated procedures.

You will probably be hiring a lawyer to represent you; in Arizona, a lawyer will certainly be appointed to represent your father (unless he already has his own lawyer). There will also be a medical report, and a court investigator. A process server will have to physically hand (or read) the court papers to your father. A hearing will be held at the courthouse. Once you are appointed, you will have annual reports to file with the court. If you have been appointed as conservator, you will also have to file a “surety bond” — an insurance company’s guarantee that your father’s estate will be made whole in the event that you misspend his money or otherwise behave inappropriately.

Wait — what’s the difference between guardianship and conservatorship (you ask)?

It’s a good question. Be careful about generalizing here — different states use different versions of these terms to mean different things (and sometimes they have the opposite meaning in other states). But in Arizona, guardianship is the court process to secure control over an incapacitated person’s health care and placement decisions. Conservatorship is the court process to secure control over the finances of a person who needs protection.

Roughly speaking, a guardian (in Arizona) has the same kind of authority that a health care agent might have. Meanwhile, an Arizona conservator has the same kind of powers and responsibilities that an agent under a financial power of attorney might be given.

So which do I want — power of attorney or guardianship/conservatorship?

It’s not really which one you want so much as which one you can get. A power of attorney requires a competent signer, willing to give the power (health, financial or both) to you. A guardianship or conservatorship requires the court to find that your father is not able to make his own decisions — in essence, not able to sign his own power of attorney. So our first question to you will be: what does his doctor say about his competence? What do you think: will he understand the nature of a power of attorney, and be willing to give you that authority?

If your father is already too far into the dementia process to sign a power of attorney, you may have no choice but to seek guardianship and/or conservatorship. If he is mentally pretty alert, and able to understand (and explain) the reasons why he might sign a power of attorney, it might well be appropriate to talk with him about that choice.

What are the relative costs?

Once again, it is hard to generalize. Getting your father to talk with a lawyer, discuss powers of attorney (and, probably, estate planning generally) and getting him to sign after he has agreed to the documents should probably cost a few hundred dollars — more, if it takes multiple meetings, he has unusual estate issues or wishes, or there is family discord to deal with. Guardianship and/or conservatorship will probably cost ten times as much, and assure continuing legal involvement as future accountings and reports have to be prepared and filed.

OK — I think dad will understand the power of attorney and be willing to sign it. Can you please come to the nursing home with one and get him to sign?

Would that it were that easy. A good lawyer will want to meet with your father more than once. While many make home (or nursing home) visits, they will probably charge more. And a key element of representation of your father requires that he be the client — that may mean that after we have talked about his situation extensively, we are uncomfortable being the ones who prepare his documents.

In that case, we are likely to refer him to another lawyer. We will probably suggest one geographically close to him, and give you some advice about how to make the initial contact. Basically, we want to make sure that (even if you make the call and set up the appointment) there is no question in your father’s mind that his lawyer is in fact his lawyer. You may be absolutely certain that you and he are on the same page — but we sometimes see situations where that turns out not to be the case, and we all want to make sure his wishes are paramount.

Do I really have to do any of this?

You might not, actually. In Arizona (this is not true in every state) there is a mechanism for family members to make health care decisions for someone who never got around to signing a health care power of attorney. There is a priority checklist (starting with spouses and working through family friends) for who can make decisions. One limitation: the person named in the checklist can not make a decision to withhold or withdraw life-sustaining artificially-provided food and fluids.

There is no similar mechanism for financial decisions. If your father has only his name on his bank accounts (or brokerage accounts, car title or deed to his house) then it will require either a power of attorney or a conservatorship to get authority to liquidate assets, pay bills or even request annual minimum distributions from his IRA. Quick — go look to see if he didn’t sign a power of attorney years ago.

This is all so complicated. Can’t I just get the power of attorney form, fill it out and get him to sign it?

Yes, and it will probably work just fine. If it doesn’t, you could look like you were trying to take advantage of him. If someone later decides your form is inadequate, or not properly signed, or has some other defect, you might not find out about it until after he is clearly incapacitated and unable to sign a new power of attorney. But candidly, those are not the most likely outcomes. What we offer is professional counsel, answers to complicated and personal questions, and peace of mind. We’re pretty comfortable that our services are worth what we charge.

We hope that helps. Good luck with your father, whether we see you or not. We know that this is a difficult time, filled with anxiety and unexpected challenges. There are also a number of rewards along the way, but no one should minimize the work you have undertaken.

Oh, by the way — if it’s your mother, your aunt, your son or your sister you are caring for, the answers are mostly the same.

Attorney Disciplined for Advice to Ignore POA Limitations

JANUARY 3, 2011 VOLUME 18 NUMBER 1
Lawyers, of course, grapple with ethical issues constantly. Elder law attorneys see particular ethical issues recur frequently. Sometimes the lawyer’s eagerness to accomplish the client’s wishes can cloud the lawyer’s ethical judgment. Sometimes the lawyer’s fascination with what might be done can even gallop ahead of the client’s wishes.

None of that is terribly profound or original. Last month, however, we were reminded of how easy it is to get enamored of a particular legal stratagem even though it may not be appropriate in a given case. The notion surfaced in the form of a Minnesota disciplinary proceeding involving attorney Donald W. Fett.

Mr. Fett was consulted by a man (we’ll call him Richard here, just to give him a name) whose brother (let’s call him Martin) was failing. Martin had moved into a nursing home, where he was likely to spend the rest of his life. Martin was unmarried, had no children, and was worth a little more than $600,000.

Martin had already signed a power of attorney naming Richard as his agent. Minnesota law provides a simplified form for powers of attorney, and it has a space where the signer can indicate whether his agent will have the authority to make gifts, including to himself. Martin had checked the line to give Richard the power to make gifts of Martin’s property, but not to Richard himself.

Mr. Fett knew that Martin’s money would be used up in relatively short order if it had to be spent on his nursing home care. Richard had told him that Martin would not want that to happen if it could be avoided, and Mr. Fett could see a way to allow at least a portion of Martin’s money to be protected. In a letter to Richard, and in several follow-up communications, he outlined his plan.

Basically, Mr. Fett suggested that Richard could make a gift of nearly all of Martin’s money, leaving him less than $3,000 (the asset limit in Minnesota for Medicaid assistance with long-term care — note that the limit is even lower in most states). That would make Martin ineligible for Medicaid assistance, but only for a limited time. The money that Richard had given away could be given back over the next couple of years, and then the ineligibility period would expire and Richard could keep the remaining money aside until after Martin’s death. That way at least a portion of his assets could go to the people he had named in his will — including Richard, his other siblings, and some charities.

The fly in the ointment for Mr. Fett’s advice: Martin’s power of attorney had expressly prohibited gifts to Richard himself. In order for the plan to work, though, Richard would have to be confident that Martin’s money would be used to benefit Martin during the ineligibility period. It was a conundrum.

Mr. Fett’s proposed solution was to have Richard liquidate all of Martin’s investments, transfer them to a bank account in Richard’s and Martin’s names as joint owners, and then withdraw them from the bank into his own name. That way, he apparently reasoned, Richard wouldn’t be using the power of attorney in a way that was prohibited — he would instead be using general rules governing joint accounts.

Richard was apparently suspicious of Mr. Fett’s advice, and eventually he consulted another attorney. That resulted in a complaint to the Minnesota disciplinary commission, the Office of Lawyers Professional Responsibility. After hearings the Office recommended that Mr. Fett be publicly reprimanded and placed on probation for a year.

The Minnesota Supreme Court agreed, and upheld both the discipline and the sanction. The Court’s opinion takes a dim view of Mr. Fett’s argument that he was not really recommending a course of action in violation of the limitation in the power of attorney. The Court notes that even if Richard could have used the joint tenancy account to circumvent the limitations of his brother’s power of attorney, Mr. Fett’s correspondence with his client failed to explain the distinction in sufficient detail to allow Richard to make an informed decision about how to act.

The Court notes that Mr. Fett’s failure to give his client complete information could have subjected Richard to serious problems. He might be held liable to return all of Martin’s money, and perhaps even triple the amount transferred. He could even be criminally charged. Mr. Fett gave him none of that information. His failure to fully inform his client was also a failure to provide competent representation, and a violation of the ethics rules for lawyers.

Mr. Fett had been a lawyer for over thirty years, and had limited his practice to estate planning and elder law matters for about six years prior to his contact with Richard. Because of that experience in the practice, and particularly in elder law, the Court determined that the sanction could be higher than would otherwise be implemented. Mr. Fett also had a history of disciplinary actions, having appeared before the Office of Lawyers Professional Responsibility five times over two decades.

The Court also considered mitigating factors such as lack of harm to either Richard or Martin (Mr. Fett’s advice was not followed) and lack of improper motive or harmful intent on Mr. Fett’s behalf. Those were not sufficient to offset the recommendation for a public reprimand, however. In Re Petition for Disciplinary Action Against Fett, November 24, 2010.

Is there a larger message in Mr. Fett’s disciplinary proceeding? We think there is, and it is this: just because a legal strategy might work, it does not follow that it must be implemented, or even that it is a good strategy. Careful consideration of all the negatives is important, and complete information should be shared with the client.

Agents Under Power of Attorney Justify $20 Million in Expenditures

OCTOBER 11, 2010 VOLUME 17 NUMBER 32
Imagine this: you have a long-standing history of philanthropy and community involvement. You have substantial assets and you feel that you should use some of them to enrich the community where you live, where you made your fortune, and where your children were raised. Your spouse agrees with you about these goals, and the two of you want to make sure someone has the power to continue to pursue those goals even if you become incapacitated. You should both sign a power of attorney, and name as agent someone who you know agrees with your world view, right?

That is what Irwin and Xenia Miller, of Columbus, Indiana, did. In 1995 they signed mirror-image powers of attorney naming one another as agent. They both named one of their five children and a long-time financial adviser as co-agents to act if either could not act for the other. Then they went about living their lives.

To make their intentions clear, Irwin Miller wrote a letter to the couple’s children in 1996. “Of all the things we can ‘leave to you,'” he wrote, “money seems to us to be the least important.” He went on to tell the children that he and Xenia “have not lived and worked primarily to maximize your inheritance.” “We have worked and lived to make a constructive contribution to our community, church, and nation. And — we have lived our own lives the way we wanted to live them, and have had a good time so doing.”

For nearly a decade after signing their powers of attorney and writing to the children, Irwin Miller spent significant sums on maintaining several homes in Indiana and Ontario, Canada. In fact, the upkeep costs on three properties were in the millions of dollars during this time period. Irwin made those expenditures despite the fact that he and Xenia didn’t actually own one of the properties — it had been purchased by the son they named as agent in their power of attorney.

When Irwin Miller died in 2004, Xenia Miller was already incapacitated. The two agents in her 1995 power of attorney began to handle her finances, as she had planned. They faced a quandary: should they continue to pay significant sums to maintain properties even though the payments would not benefit Xenia Miller’s estate? Even though she might not be able to enjoy visiting two of the properties any more? Even though the expenditures might actually benefit one of the agents?

Xenia Miller died in 2008. During the four years between Irwin’s and Xenia’s death, the agents under the power of attorney spent over $20 million on keeping the properties going, making improvements and (in the case of the family home) arranging to interest the Indianapolis Museum of Art in moving into the property. Concerned that the expenditures might be challenged, they ultimately filed a petition with the local probate court seeking approval of their expenditures.

One of Irwin and Xenia’s children objected, and a four-day hearing was held on the accounting filed by the agents. Among his allegations: because the agents were acting under a power of attorney, their behavior created a presumption of undue influence requiring that the payments be set aside. The probate judge listened to testimony and arguments from both sides and then approved all the transactions. The judge also ordered the objecting son to pay the legal fees incurred by the agents.

The Indiana Court of Appeals reviewed the holding and agreed that “Xenia and Irwin Miller were extraordinary individuals who did everything in their power to enrich their community, support their family, and better society as a whole.” The appellate judges upheld the probate court approval of the expenditures; they did, however, rule that the contest was not frivolous and so reversed the award of attorneys fees. In Re General Power of Attorney of Miller, September 30, 2010.

The Millers left an extraordinary legacy — on many levels. They provided for their five children. They enriched their community. They created a lasting memory of a wealthy and public-spirited family. Though they probably did not intend to leave a legal precedent that could guide others, they did. By writing what amounted to an “ethical will,” setting out not just financial inheritances but also principles he lived by and hoped would guide his children, Irwin Miller gave us another legacy: he taught us that a power of attorney can be used to carry out the intentions of the signer, even if his purposes are not solely financial.

The Court of Appeals opinion is worth reading, if only for the language of Irwin Miller’s letter to his children. For more on the extraordinary Millers, consider the Christie’s auction notice describing sale of their collection and their impact on the architecture and art communities. Xenia Miller was an extraordinary individual in her own right, with business, art, religious and civil rights credentials that earned her recognition and acclaim.

Durable Powers of Attorney Are Important But Dangerous

APRIL 26, 2010  VOLUME 17, NUMBER 14
A power of attorney is one of the most important, powerful and dangerous documents you will ever sign. Why is it important? Because your family has no inherent right or power to handle your finances in the event that you become incapacitated. Why is it dangerous? Because it is literally a license to steal.

Of course the agent named in your durable power of attorney is not supposed to steal from you. In fact, he or she can go to jail for doing so. But the whole point of the power of attorney is to make it easier for someone to handle your finances without court oversight, and without having to answer to banks or others. Too often agents abuse those powers of attorney.

So why is it important for you to sign a power of attorney? Because the alternative is, for most people, even more disturbing. Your family members and even your most trusted advisers are not able to handle your bank accounts, pay your bills, buy or sell property or protect against abuses by others — unless you have given them authority to do so in an appropriate document. That usually means a power of attorney.

There are alternatives, of course. You could create a living trust, name a successor trustee and transfer your assets into the trust. That may make it a little bit easier for your successor to handle your assets, but it does not provide any additional protection. You could simply add a trusted person to the title on each of your accounts — but that provides even fewer safeguards, and exposes your property to claims leveled against the now-joint owner of your assets.

Or you could simply hope never to need anyone to act on your behalf. Then when someone needs to act they will have to go through the process of securing a conservatorship over your estate (what some states call a guardianship of your estate). That provides better protection, but perhaps at a greater cost than you want to incur — and it means the court, rather than your family member or trusted adviser, having the ultimate authority.

That is why almost everyone we counsel ends up signing a durable power of attorney. That is also why it is so critical to make sure you have selected your agent carefully, warned them about the limitations on their authority, and provided them enough information so that they can act appropriately.

Want to know more about durable powers of attorney? Check out our new White Paper on durable powers, prepared by us for our friend and colleague Slade V. Dukes, Program Fellow for the Stetson University College of Law‘s Elder Consumer Protection Program. While there look at our White Papers on other topics, too, including Estate Planning, Guardianship and Long Term Care Planning.

Video by Exploiters Leads to Witness Tampering Conviction

DECEMBER 21 , 2009  VOLUME 16, NUMBER 65

Washington State resident Shirley Crawford, then age 80, had a difficult problem to deal with. She had fallen in 2001 and was hospitalized. Her only child, Anne, was severely mentally disabled and lived in Ms. Crawford’s home. Ms. Crawford needed someone to help her with management of her financial affairs and care of her daughter.

Ms. Crawford turned to a long-time friend and distant relative, Judith Thompson. With the help of a lawyer Ms. Crawford signed a power of attorney form giving Ms. Thompson wide-ranging powers over her finances.

Within three months Ms. Thompson was trying to use the power of attorney to make gifts to herself. The broker where most of Ms. Crawford’s money was held refused to honor the power of attorney for that purpose, saying it did not include gift-making authority.

In the following year Ms. Thompson and her husband secured a new power of attorney from Ms. Crawford — this one specifically allowing them to make gifts to themselves. They sold her house and used more than $300,000 of the proceeds to pay off their own debts and to buy a $200,000 boat for their Alaska fishing charter business.

It took almost three more years before the state Adult Protective Services office and, ultimately, the Washington courts to begin to undo what the Thompsons had done. While investigations and court proceedings were pending, the Thompsons apparently thought it would be helpful to their cause if they had Ms. Crawford on videotape approving of the gifts they had made.

The videotape showed Mr. Thompson telling Ms. Crawford that he had compiled a series of statements from things she had told the Thompsons. The list included such items as “I wanted [the Thompsons] to have my house.” Ms. Crawford was shown nodding and agreeing with the statements as Mr. Thompson read them.

The Thompsons’ videotape never got introduced in the guardianship matter. It did, however, get used in court — in a criminal trial in which Mr. and Ms. Thompson were accused of tampering with a witness. At that trial Ms. Thompson testified that she and her husband had transferred Ms. Crawford’s assets to their name to protect her from thieves, and that the “investment” in their fishing charter business was safer than the stock market.

A jury found the Thompsons guilty of witness tampering, and the Washington Court of Appeals upheld their conviction. The appellate court ruled that the Thompsons had reason to believe that Ms. Crawford would be called as a witness in her own guardianship proceeding, and that they were trying to induce her to give false testimony. State v. Thompson, November 23, 2009.

As often happens in exploitation cases, the Thompsons insisted vehemently that they were following Ms. Crawford’s wishes, and that they intended to take care of her developmentally disabled daughter. The facts did not bear out that assertion, however — over the course of their involvement, virtually all of Ms. Crawford’s money went to the Thompsons, and none of it went to the care of Ms. Crawford’s daughter.

The Thompsons were also charged with (and convicted of) theft. That much makes an all-too-common story of exploitation of a vulnerable elderly woman. It is even common for exploiters to try to enlist their victims in an attempt to whitewash the evidence of misbehavior. What makes the Thompsons’ case stand out is their successful prosecution for what that attempt was: tampering with a prospective witness in a contested court proceeding.

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